Oral Answers to Questions

Pat McFadden Excerpts

Tuesday 9th March 2021 Commons Chamber

[Rishi Sunak]

My hon. Friend has been instrumental in providing on-the-ground information to me and my team about the particular situation facing hospitality businesses in coastal communities like his. He is an absolute champion for them and rightly so. They are an important part of his local economy and I am glad that this Budget supported them. He has my assurance that we will continue to work with him and them to get them the support that they deserve.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The Office for Budget Responsibility estimates that £27 billion-worth of loans made under coronavirus loan schemes will never be repaid. Why is the Chancellor insisting that banks pursue that as conventional business debt, when the circumstances that gave rise to those loans are anything but conventional? Would lifting the debt burden on businesses and turning it into a contingent tax liability not help to fire up the economy, set business free and really get Britain moving again?

[Rishi Sunak]

What we have done is provide a scheme called Pay as You Grow to give businesses incredible flexibility and generosity in how they repay bounce back loans. Those loans at an instant can be turned automatically into 10-year loans, which reduces the monthly cash payment by almost 50%. Beyond that, there are opportunities for interest-only periods and payment holidays, all of which will support the cash flow of businesses. We also have to get a balance with the taxpayer in all of this, which is why we have taken the approach we have. I am sad that the right hon. Gentleman did not also welcome the £25 million of investment in his local community through a town deal in this Budget, which will help local businesses there as well.

CUSTOMS TARIFF (ESTABLISHMENT) (EU EXIT) REGULATIONS 2020 TAXATION CROSS-BORDER TRADE (SPECIAL PROCEDURES SUPPLEMENTARY AND GENERAL PROVISION ETC.) (EU EXIT) REGULATIONS 2020 CUSTOMS TARIFF (ESTABLISHMENT AND SUSPENSION OF IMPORT DUTY) (EU EXIT) (AMENDMENT) REGULATIONS 2021

Pat McFadden Excerpts

Monday 22nd February 2021 General Committees

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Thank you for your chairmanship, Mr Hollobone. I also thank the Minister for his explanation of the statutory instruments. As he said, this is about the customs regime and our tariff schedules following our departure from the European Union. The tariff rates were first announced by the Government in May last year as the UK global tariff, which succeeds the EU’s common external tariff.

The changes will see a large proportion of tariff lines undergoing some degree of change. The Minister mentioned a couple of them—pistachios and cotton thread, I think. The explanatory notes state that the effects of all that are quite varied. I do not expect him to go through everything, because it will deal with a great many different product lines, but if he could give us a couple of examples of perhaps the most dramatic changes, and one or two where there is no change at all, that would help to illustrate what we are talking about, because they will have a varied effect on business. From what the Minister said, I think the policy aim is to get rid of tariffs where there are no realistic UK production or competition implications, but he may correct me if I am wrong in that impression.

Will the Minister also say something about the impact on consumers? I noted his hymn of praise for all the trade agreements that the UK has been able to agree in the past year or two—I think 60-odd were mentioned. The Minister might have been slightly coy, but I believe that most of those were trade agreements to which we were previously already a party as an EU member; they were not newly negotiated agreements. He may correct me if I am wrong on that. The casual listener—I am sure that many are listening to our proceedings—might have thought that there were 64 new trade agreements. Perhaps there will be one day, but I think most were continuity, rolled-over agreements.

The statutory instruments deal with the tariff schedule changes. What we have learnt, in particular in the past six or seven weeks, is that while tariffs are a major part of international trading rules, the fluidity of modern trade does not rest on tariffs alone; it also rests on the ease and speed with which goods and services can cross borders. I would be grateful were the Minister to update us on the situation with some of the non-tariff barriers we have seen in the news recently.

One thinks of sectors such as shellfish and small distilleries, of trade between Great Britain and Northern Ireland, and of much more, not to mention the export of share trading from London to Amsterdam or the difficulties faced by the UK’s world-leading musicians in touring. Those things are not about tariffs, but they are about trade barriers. Taken together, they are having a major disruptive effect on the sectors I have mentioned. I do not want the Minister to be too coy. I would be grateful if he were to update us on the Government’s discussions with such sectors and on what the plan is to overcome the difficulties that we have heard about in recent weeks.

As the Minister said, the second and third statutory instruments include a number of technical provisions, alongside changes that seek to replicate arrangements that existed when the UK was a member of the EU under which import duty can be suspended or relieved in certain circumstances. That is often when raw materials or semi-manufactured goods are imported and then processed for re-export or placed on the home market, and when goods such as items for exhibition are imported temporarily. We recognise that, as the notes set out, those changes are technical and the impact expected to be little.

Turning to the third instrument, the Customs Tariff (Establishment and Suspension of Import Duty) (EU Exit) (Amendment) Regulations 2021, if I have understood it correctly, it appears largely to be about amending the first instrument, the Customs Tariff (Establishment) (EU Exit) Regulations 2020. Will the Minister tell us how that came about and why it was not possible to include in the first instrument any necessary corrections that had been identified before it came before us, particularly as we are debating the original and the correction on the same day? It seems a bit odd that we have ended up debating one statutory instrument with another one revising it on the same day. Will he tell us how that came about?

Finally, on timing, the instruments are intended to provide continuity following the end of the transition period. For example, the third instrument states that it will come into force on 22 January, but today is 22 February. What has been the legal basis for the operation of the rules between the publication of the instruments and their being debated here and now, some six or seven weeks after the end of the transition period?

[Jesse Norman]

I thank the right hon. Member for Wolverhampton South East for his questions and for his highlighting of certain specific items on which he wants some discussion and feedback.

The right hon. Gentleman asked about areas in which there have been dramatic changes and ones in which there have been no changes. As he has said, there are many areas in which there has been very little change indeed. To give an example, I have talked about the reduction in pistachios and cotton from 1.6% to 0%, which is irrelevant, as we do not produce pistachios in this country. There are also goods—spanners and wrenches, for example—for which the tariff has been reduced from 1.7% to 0%. I am sure that is important for anyone in the car repair trade, and it is part of the overall structure of the approach, which, as he has mentioned, is to liberalise in order to reduce inputs to production costs.

Of course, the right hon. Gentleman is right to flag the fact that in other areas the tariff arrangements are larger. It is worth mentioning that there will be a difference between tariff arrangements that govern goods that enter under these arrangements, and those that enter under a free trade agreement. For example, a finished car that arrives from South Korea, with which we have an FTA, can enjoy a 0% tariff, whereas a similar vehicle arriving from Thailand would have a 10% tariff.

The right hon. Gentleman also asked about the consumer impact. Again, the point of this approach is, in part, to keep production costs low, and the hope is that, by and large, the effect of that will be to lower prices for consumers. There are other areas in which it has been important for the global tariff to reflect the balance between producers and consumers. For example, in certain agricultural tariff areas, although the level overall has been simplified—the levels have been reduced in some cases, and the numbers simplified—there are key areas in which the tariffs remain, broadly speaking, what they were before.

The right hon. Gentleman asked about free trade agreements. Of course, it is true that in many cases the effect of these free trade agreements is to replicate trading arrangements that we enjoyed with the EU countries beforehand, but those agreements still need to be negotiated. The good news is that we start from a very high position of previous alignment with those countries, which has certainly facilitated the process.

The right hon. Gentleman also asked about non-tariff barriers. I can only admire his ingenuity in crowbarring a discussion of non-tariff barriers into the debate about this statutory instrument, which is explicitly about a UK global tariff. It is as though we have separated out black and white and, although we are debating white, he wants to discuss black. Nevertheless, I am of course happy to discuss it. He mentioned shellfish. He will be aware that the Government have put in place a £23 million fund designed to support seafood businesses across the UK that may have experienced a verifiable loss during the movement of goods to the single market. The Government have also committed to a £100 million investment to rejuvenate the industry and coastal communities across the UK. The Government take those issues seriously.

In the case of musicians, as the right hon. Gentleman knows, the Government made a very comprehensive set of suggestions to the EU. Unfortunately, we have not been able to negotiate those as we would have liked, but that is not through any fault on this side of the equation. I will not speculate on why it is, but it is certainly nothing to do with tariffs and nothing to do with the Government’s position, which remains to support our musicians in their employment, where we can, as much as possible. That is evidenced by the £1.6 billion of cultural support funding that we have provided.

As for the legal basis, as the right hon. Gentleman will be aware, these instruments have been introduced on the basis that I described in my speech: the first SI under the made affirmative procedure, and the second and third as described in the explanatory memoranda. However, if he wants any further discussion on that, I am happy to write to him.

[Mr McFadden]

Can I just ask a question on that final point about the legal basis? The reason I ask is that we are now seven weeks on, and we are debating a set of SIs that are designed to ensure continuity after the end of the transition period. From a legislative point of view, how long can this go on for? In theory, could we come here after six or nine months and say that we need the statutory instrument to ensure continuity after the end of the transition period? In other words, how long after the fact can Parliament debate laws that have effectively come into force—in this case, seven weeks before we have debated them? Is this endlessly elastic, or is there a cut-off point at which the process—the mountain of secondary legislation needed to adapt to this—has to be done and dusted?

[Jesse Norman]

I think it is worth saying that much of the legislation, as the right hon. Member will know, has taken the form of negative statutory instruments, via the negative procedure, and they have not been prayed against, and one must therefore assume that they are acceptable to Members across the House. On the basis of the rules that he described, it is not infinitely extendable. Under sections 51 and 52 of the 2018 Act, the Treasury may make regulations that come into force before being debated in Parliament, but that is provided only if the debate occurs within 60 days after coming into effect. That has been the legal basis of the operation since 1 January until today.

Question put and agreed to.

TAXATION CROSS-BORDER TRADE (SPECIAL PROCEDURES SUPPLEMENTARY AND GENERAL PROVISION ETC.) (EU EXIT) REGULATIONS 2020

Resolved,

That the Committee has considered the Taxation Cross-border Trade (Special Procedures Supplementary and General Provision etc.) (EU Exit) Regulations 2020 (S.I., 2020, No. 1439).—(Jesse Norman.)

CUSTOMS TARIFF (ESTABLISHMENT AND SUSPENSION OF IMPORT DUTY) (EU EXIT) (AMENDMENT) REGULATIONS 2021

Resolved,

That the Committee has considered the Customs Tariff (Establishment and Suspension of Import Duty) (EU Exit) (Amendment) Regulations 2021 (S.I., 2021, No. 63).—(Jesse Norman.)

Oral Answers to Questions

Pat McFadden Excerpts

Tuesday 26th January 2021 Commons Chamber

[John Glen]

My hon. Friend has a lot of expertise in this area. He will know that, alongside the trade and co-operation agreement, we had a joint declaration to establish a structured regulatory co-operation for financial services and to discuss a whole range of matters around equivalence determinations going forward. The memorandum of understanding will be agreed in discussions between the EU and UK by March 2021. That will establish a framework for that co-operation. It would not be appropriate for me to give a running commentary on that, but the plans will come to fruition over the coming weeks.

[Mr Pat McFadden (Wolverhampton South East) (Lab) [V]]

The Brexit deal was, in effect, a no-deal outcome for financial services. Already some trade has moved, and there is big uncertainty hanging over access to European markets for this vital UK sector. Can the Minister confirm that it is in fact a Government negotiating aim to secure equivalence recognition for UK financial services in the memorandum of understanding being discussed between now and the end of March?

[John Glen]

To clarify for the right hon. Gentleman, the equivalence granting process is an autonomous, separate process from the MOU discussion. The MOU is about a framework to evaluate the future direction of financial services across the EU and UK. I remain very ambitious for the financial services sector. The Chancellor and I are continuing to have a dialogue—with roundtables with representatives of the sector this week and next week, as well as one-to-one meetings—to ensure that we listen to the sector, and respond appropriately and ambitiously for the future.

Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020

Pat McFadden Excerpts

Tuesday 19th January 2021 General Committees

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am grateful for your chairmanship, Mr Mundell. I am also grateful to the Minister for his explanation of the order before us. Like many such proposals, this legislation is the culmination of a process that began, I think, about three years ago. As the Minister said, at that time reports by Citizens Advice Scotland and Fairer Finance outlined problems in the marketing of funeral plans, and called for more regulation of the providers. The Fairer Finance report pointed out that a funeral plan looks and feels like a financial services product but is not regulated like one. It also found that 75% of the people it surveyed who had one thought that it already was regulated like a financial services product, and did not realise that it was not.

The calls for regulation were further spurred by reports of high-pressure selling and a lack of understanding, in some cases, of what the plans covered compared with what people expected them to cover. Obviously, at the time of a funeral, such disparities and, perhaps, surprise extra costs, are particularly upsetting to people.

The Government carried out their consultation and most respondents, such as Age UK and the Law Society of Scotland, favoured regulation. However, it should perhaps be pointed out that there were only about 30 responses. That is not a huge number for a Government consultation. Most were in favour.

The Minister mentioned the FPA, and I held a call with it last month, when it was originally thought that the order would be debated before Christmas. That organisation is not in favour of what the Government are doing, and it made a couple of points that I would like the Minister to respond to. First, it believes that the allegations of mis-selling have been exaggerated, and that the proposed regulation will add costs to what are in many cases small, family-owned businesses.

On the plans themselves, the FPA points out that if not all current providers are approved by the FCA under the new regime that could leave some customers with unapproved plans, or plans that they took out with unapproved providers. What will happen in those circumstances? The Government might hope that an approved provider—and there are some quite big operators in the market—would take over the plans. I am sure that in some cases that would happen. However, what if it did not? Where would it leave someone who had bought such a plan? The customer has not done anything wrong and has bought a plan in good faith. The FPA points out that offers of a refund in those circumstances are not really what customers want. They want a plan that covers the cost of their funeral—not to be told to start again. It estimates that there could be up to 40,000 people in that position. I would like the Minister’s response about people in those circumstances.

The FPA also disputes the Treasury’s estimates of the costs to the sector in the impact assessment provided to the Committee this morning.

Having asked those questions I should make it clear that the Opposition will not oppose the order. The Minister and I debate such things frequently and he knows that I often say that with innovation and change in financial products there must also be innovation and change in the regulatory boundary. Plans of the kind we are discussing have been around for some time, but if we look at the 10-year horizon we can see there has been quite big growth. In 2017, when the process began, there were about 200,000 policyholders. I think it has tailed off a bit in the last couple of years, but there is still a substantial number of people who hold such plans.

Of course, the Minister would also expect me to say that as the role of the FCA changes the question of how it is resourced also comes up. The principle in such matters is usually that the fees for the regulation are raised through registration, and so on. Is the Minister confident that the fees raised will allow the FCA to devote the proper resources to the task? Its role is expanding in a number of other ways, such as through the onshoring of lots of European Union regulation.

Finally, given that we are debating this matter this morning, perhaps we should say a word about the difficult circumstances that people have been in with funerals over the past year. Every faith and tradition has its own way of saying goodbye to loved ones. In my family, it is an Irish funeral tradition, which usually involves a full wake, an open coffin in someone’s house, a full funeral mass and some kind of gathering afterwards. It is a big occasion.

The ability to say goodbye properly is so important to grieving families, whatever people’s faith or tradition. There are many ways of having a funeral, but what they all have in common normally is that family and friends come together to bid a final farewell to a loved one they have lost. With covid, that has not been possible over the past year, at least not in anything like the normal way. We have had around 90,000 covid deaths, but the funeral rules have applied to everybody, regardless of the cause of death.

Nobody in the past year has been able to have a proper funeral. The numbers are severely restricted. Wakes cannot happen. People cannot visit somebody’s home to pay their respects in the usual way. That has caused an awful lot of heartbreak to grieving relatives, and is a very painful consequence of the pandemic. Perhaps we have not talked enough about what the country is going through. We should record our thanks to funeral directors throughout the country who have tried to deal with this in the most sensitive way, trying not only to look after the dead but to help families under the severe restrictions. Of course, funeral directors have also had to do what they could to protect their own staff, with personal protective equipment and other measures, when handling funerals.

I spoke to one funeral director in my constituency yesterday, Susan Ellsmore. She runs a relatively new company; it is only three years old. She spoke of the difficulties imposed by the inability to have face-to-face contact with grieving families, of the pain imposed on families by the restrictions on numbers, with families having to make terrible decisions about who can come to the funeral and who cannot, of the financial pressures that people are under trying to pay for funerals when they might have lost their jobs or had their hours cut, and of the broader effects on the country of so many people not being able to say goodbye properly and, in a way, having grief and the normal displays of grief delayed.

I conclude by thanking Susan, and all companies like hers that have had to cope with those awful consequences of the pandemic. In a debate that is about regulation we should not forget the most human side of all this, and the impact that the past year in particular has had on grieving families.

Financial Services Bill

Pat McFadden Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before I call the shadow Minister, I should say that we have until 6 o’clock for this debate and a number of colleagues want to get in. I have introduced a five-minute time limit to start with, to try to accommodate some of the main people behind other amendments, but it is very likely that I will quickly have to take that down afterwards; I just warn colleagues that that may well happen.

I remind hon. Members that when a speaking limit is in effect for Back Benchers, a countdown clock will be visible on the screens of hon. Members participating virtually. For hon. Members participating physically in the Chamber, the usual clock in the Chamber will operate.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Madam Deputy Speaker, may I wish you, the Minister and the House a happy new year?

The Bill returns to the House at a very important moment for the country’s economy and our financial services industry. We have just come to the end of the transition period with the European Union, and we are of course in the teeth of the battle against the virus. Against a background like that, the business of legislating can seem even more prosaic than usual, and perhaps that is even more the case with a Bill such as this one. It is a mixed bag of measures dealing with everything from onshoring various EU directives to the length of the term of office for the chief executive of the Financial Conduct Authority. Some of it is a necessary consequence of our withdrawal from the European Union, and other parts look as though they have been sitting in the Treasury waiting for a legislative home, like policies hoping for a passing bus.

I want to focus on the amendments tabled in the name of the Leader of the Opposition and then turn to some of those tabled by my right hon. and hon. Friends. The first amendment I want to speak to is our amendment 1 on the UK’s net zero commitments. The Bill sets out, in schedules 2 and 3, a list of things that the regulators have to have regard to in the exercise of their new and expanded functions under the Bill. It talks of international standards and competitiveness, yet nowhere is there a mention of the overarching goal that will shape so much of our economy in the decades to come.

In this place, we have rows and arguments about all manner of issues, but sometimes the things that generate the most heat, if the Minister will pardon me the pun, are not always the biggest or most important issues. Conversely, just because an issue has bipartisan support does not make it less significant, and there is no doubt that the Climate Change Act 2008, as amended by the Climate Change Act (2050 Target Amendment) Order 2019, is one of the most significant pieces of economic legislation to pass in this country for many years.

To achieve our net zero goals will require wholesale change in many walks of life. The briefest of looks at the Committee on Climate Change’s report on how this should be done shows what the main areas will be. On energy, we need to find replacements for fossil fuels, we have to invest in the shift to hydrogen and we are still trying to make carbon capture and storage a practical reality. On transport, the transition to battery power will have to proceed at an ever-increasing pace. On housing, we need not only to build new zero-carbon homes, but to retrofit millions of existing homes with zero-carbon heating systems. Agriculture, food production and even the clothes we wear—all these things will undergo big change, and all of them will require significant financial investment.

The UK financial services sector has a huge role to play. In seeking a post-Brexit role, what better long-term mission could there be than empowering the change that we need to make to preserve the planet for future generations? This is not just my view—the Chancellor himself has said as much. In his statement on the future of financial services, given two months ago from the Government Dispatch Box, he not only announced the first green gilts, but said he wanted to see

“the full weight of…capital behind the critical global effort to tackle climate change”.—[Official Report, 9 November 2020; Vol. 683, c. 621.]

Yet this Bill, which empowers the regulators in so many other ways, is totally silent on that issue. The Minister says we might do it in the future. [Interruption.] He says from a sedentary position that we will do it in the future. He has an opportunity to do it today—he could just accept the amendment. What is the point of waiting until the future to do this, as he has indicated he will, when there is an amendment that does not seek to add any new commitments but simply to make this part of the remit of our financial services regulators?

There are many reasons, as my newly ennobled—if that is the correct word; newly honoured, perhaps—hon. Friend the Member for Wallasey (Dame Angela Eagle) said, to say no to amendments, but “not invented here” is one of the worst if the Government have indicated they are going to accept it.

The Government say they want the UK to be the centre for green finance globally, but their first legislative outing on this sector since we left the European Union says nothing about mandating the regulators of the industry to make that part of their mission. As I said, our amendment does not seek to add to the commitments on net zero that the UK has already made, which are already set out in legislation and enjoy the support of all sides of the House, but to make these part of the remit of the regulators that shape our financial services industry. There is already a move towards greater environmental investing from investment funds and from consumers who want to invest in this way, and there is a desire for these products, so why do the Government not back that up by making it part of the regulators’ remit?

We know that these commitments cannot be met without large-scale investment. To anyone who says to just leave it to the market if there is an investor desire, we also know that it cannot be done by the private sector alone. This will take both the private sector and the public sector working together and pulling in the same direction. It is in that spirit that we put forward the amendment. We ask for something that has bipartisan support, is in line with the post-Brexit goal for the sector as set out by the Chancellor himself and will make it easier for the country to achieve its commitments.

Further to that, we are also asking for something that the Minister said in recent minutes that the Government will do at some point anyway. We very much hope that, between now and six o’clock, the Government will reconsider and accept the amendment, which they said they agree with and will bring forward in some way themselves at some point.

Just two weeks ago, the House approved the post-Brexit trade and co-operation agreement, but for financial services this is basically a no deal agreement. The references within it do no more than repeat standard pledges of co-operation in every free trade agreement. The Prime Minister himself acknowledged that, for this sector, he did not achieve as much as he hoped. Indeed, within a few days of the agreement, £6 billion-worth of euro-denominated share trading shifted from London to European exchanges—an immediate response to the new situation.

[Dame Angela Eagle]

Does my right hon. Friend agree that the way the Government approached the Brexit negotiation means that there is literally no incentive for the EU to agree equivalence arrangements, because the lack of them means exactly what he just pointed out—jobs and trading formerly done in London migrating to the EU? Does he also agree that, in this new environment, any move by the Government to give the City a competitive edge is likely to lessen the chances of progress on equivalence in the EU, and the market access that comes with it? That is another threat to jobs in the City and to tax revenue for the Exchequer.

[Mr McFadden]

My hon. Friend is absolutely right that this throws into sharp relief the claim that we hold all the cards. It also throws into sharp relief the debate about divergence, as that remains undecided. The fact that the agreement approved by this House two weeks ago did not cover financial services in any meaningful way was not an accident; it was a choice that the Government made. Step by step, the Government abandoned any attempt to prioritise the market access that the financial services sector, and indeed services in general, had until the end of last year. I remind Conservative Members of the Chequers paper published in 2018, of which they may have more or less fond memories. It acknowledged that on this issue,

“there will be more barriers to the UK’s access to the EU market”

than there are today. On equivalence regimes, it said:

“These regimes are not sufficient to deal with a third country whose financial markets are as deeply interconnected with the EU’s as those of the UK are. In particular, the existing regimes”—

that is, the equivalence regimes—

“do not provide for…institutional dialogue…a mediated solution where equivalence is threatened by a divergence of rules or supervisory practices”.

That which was deemed insufficient by the Government two and a half years ago has now become the height of their ambitions, and even that has not yet been achieved. With each step back from what they aimed for before, the incentives to shift funds and people become bigger.

--- Later in debate ---

[Kevin Hollinrake]

The right hon. Gentleman is speaking to an important amendment that not only allows for corporate prosecution but allows for a person who is registered with the FCA to be prosecuted. Is that not a critical point? Unless we start holding individuals to account for these wrongdoings, we will never stamp out these corporate failures and this corporate abuse.

[Mr McFadden]

The hon. Gentleman makes a very strong point, and it is why we believe these are strong amendments. We should do this because it is right in itself, and it is an important signal to send about financial services in this post-Brexit world. We do not want to send a signal that we are going for relative weakness in anti-fraud and anti-money laundering laws. Instead, the signal should be that we insist on the strongest possible measures.

New clause 21 seeks to establish a duty of care. This is a long-running debate, and we tabled a similar amendment in Committee. The new clause is intended to make companies ask not just whether their products are legal but whether they are right and are in the consumer’s interest.

New clauses 25 and 26 seek to address the plight of mortgage prisoners. These are people who are stuck on very high standard variable rates and have no ability to switch. All I would ask is, if the Minister cannot accept these amendments, will he continue to work on this issue to try to help these people who are trapped, through no fault of their own, on very uncompetitive rates? He mentioned 3% or 4%, which is much higher than is available in a mortgage environment where the base rate is 0.1%. That can mean paying thousands of pounds more per year, depending on the size of the mortgage, so this is a real material difference for people.

We have a global financial sector in this country that, if properly regulated and paying its way, is a huge asset to the people of this country. We want it to be innovative and successful, but we also want to ensure the public are properly protected against risks if things go wrong. That is the spirit in which we tabled these amendments, and it is the spirit in which we have approached the Bill throughout. I hope the Minister will consider that when it comes to the votes in a couple of hours’ time.

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I rise to support amendment 7, in the name of the hon. Member for Bethnal Green and Bow (Rushanara Ali), myself and 41 other Members. The Minister knows well, because we have had this discussion before—just in case it was to be private, I want to make it public, not because I do not trust him, but I just think it is helpful for him to know that—that the amendment seeks to bind or hold those involved in financial trade and investment to a definition of who they should not trade with and why. To that extent, it introduces the concept of a genocide definition. This measure is also in the Trade Bill, which is coming back to the House, and I make no apology for supporting the hon. Member for Bethnal Green and Bow in this. She will speak later, but as I understand it, she may not move the amendment. However, that is not the point. The point is that it is time to air this argument.

For too long, we have allowed ourselves to walk away from the issue of genocide without ever managing to hold any country guilty of this. Successive Governments have found it impossible to act because these issues are apparently referred to the International Criminal Court. The Government say to me, “It’s a matter for the international courts,” but they know full well that any reference to the ICC has to come from the Security Council, and it will never come from the Security Council because at least two of the nations there will always block it, particularly if it is to do with them or their allies. That is a distinct weakness, and I refer, of course, to the Chinese Communist party and Russia.

Let me give a couple of examples. We have discussed many times—the Foreign Secretary made a statement on it this week—the fact that many companies invest in, take trade from and take goods from areas of the world that are using slave labour. We know that this is happening in many places. For example, what is happening to the Rohingya is, in my view, likely to be defined as genocide. We can also look at what is happening to the Uyghurs in China. It is becoming more and more apparent every day that between 1 million and 3 million Uyghurs have been moved into labour camps. They are used as slave labour. They face forced sterilisation. There has been an 85% drop in their birth rate in that area. They have been moved out of their original area of work, and they are no longer allowed to speak their own language.

That is just one aspect, but a very brutal one, of what the amendment tries to deal with. After the Rwandan genocide in 1994, nothing happened. After the Bangladesh genocide in 1970, nothing ever happened. After the Cambodian genocide, nothing ever really happened. We still do not know what will happen, if it ever does, about Daesh’s genocide against Christians, Yazidis and so on, and companies will never be held to account for what they were involved in.

I realise that time is short, so I will conclude. Neither this amendment nor the one to the Trade Bill ties the Government’s hands. It does not give courts the right to proceed with investigations without reference. It does not give them the power to make criminal punishment, and it does not strike down trade deals or force criminal prosecutions. It would raise to the attention of the Government and the world that, at last, a domestic court here in the UK—the High Court or maybe the Court of Session—will be able to rule that, by all probability, genocide has taken place, and any financial institution, company or organisation involved with that area where genocide has taken place or with that country would no longer be allowed to do so. The Government would have to make that decision; that is the point.

I understand that, this week, the Board of Deputies is coming out in support of the amendment to not only this Bill but, importantly, the Trade Bill. I also understand that the US Senate, having seen what we have put forward, now plans to do the same. We have a chance here for leadership in the world. I thought we left the European Union to empower our courts and to give leadership. Again and again, I have been told by Ministers, “Not this, not now, not here.” The simple question I ask is, “Exactly when, what and how?” because that is never answered.

I finish by reading this:

“First they came for the socialists, and I did not speak out—

Because I was not a socialist.

Then they came for the trade unionists, and I did not speak out—

Because I was not a trade unionist.

Then they came for the Jews, and I did not speak out—

Because I was not a Jew.

Then they came for me—and there was no one left to speak for me.”

We need to speak out for all these oppressed peoples, whether it is in finance or in trade, and take the moral high ground.

--- Later in debate ---

[Mr McFadden]

I will not detain the House for very long. As this is my last contribution to the debate on this Bill, I begin by thanking the Minister and his Bill team for their patience and forbearance throughout our proceedings—it feels like we have been dealing with this for a few months now. I also thank the SNP spokesperson, the hon. Member for Glasgow Central (Alison Thewliss), who has gone through the Bill assiduously and tabled many amendments.

I thank the Clerks in the Public Bill Office, Kevin and Nick, for helping us. They play a particularly important role in helping Opposition Members to draft and discuss amendments. The ideas are our responsibility, but they give us very good and important technical advice.

I thank the Committee Chairs, the hon. Member for Shipley (Philip Davies) and my hon. Friend the Member for Ealing Central and Acton (Dr Huq), and all the Members who have taken part in the debates, tabled amendments or spoken in any way. I make particular mention of my hon. Friend the Member for Wallasey (Dame Angela Eagle), whom I congratulate on her recently awarded damehood. Finally, Mr Deputy Speaker, I thank you and your colleagues in the Chair.

We have not opposed the principle of the Bill, and we will not vote against Third Reading tonight, because we recognise the need for post-Brexit stability in regulation. We also recognise that this is possibly the first of a number of pieces of legislation of this type. We have sought to improve the Bill in various ways, either in Committee or today on Report.

With the exception of the FinTech and financial crime amendment, the Minister has been, for the most part, resistant to these amendments, but a number of key issues have been raised. I hope that he and the Treasury will consider the broad sweep of issues raised around things such as: crime and money laundering—there is a real desire in this Parliament not to see our financial sector being regarded as an easy place for those things to happen; consumer debt and protection—Members have voiced quite passionate concerns, particularly given the year that we have just been through and the impact on household finances, that consumers are given help with what for many is a growing debt burden, and protection against mis-selling or inappropriate treatment by financial services providers or companies; mortgage prisoners, who we have heard about tonight, many of whom are locked into very difficult and disadvantageous mortgage products; plus the broader issues that we have raised about post-Brexit financial services, equivalence, green finance and so on.

The Government made a big decision—a big choice—particularly in their reincarnation, or incarnation, since December 2019: to place the issue of sovereignty above considerations of market access. We might go further and say that they chose to place the issue of sovereignty above considerations of economic prosperity, although perhaps Ministers and Members abroad would contest that. None the less, a choice like that was certainly made and it has big implications, potentially, for a sector that contributes a significant proportion of our GDP, employs around one in 14 people in the country, earns a lot of export revenues for the country and is a very significant contributor to tax revenues that pay for public services. We all have a great deal of interest in how this sector will be run as we have come to the end of the transition period. As I said earlier, we want this sector to be successful, to be innovative, and also to be responsible.

We want to ensure that the sector does well, but also that the public is properly protected against the risks inherent in an economy like ours, having such a globally significant financial services sector, and the risks if things go wrong, which we saw in our recent history. We certainly do not want to see a slash-and-burn approach to regulation in order to compensate for the decision—I stress the word “decision”— to lose at least a proportion of the market on our doorstep. It is in that spirit that we have approached the Bill, that we have tabled the amendments, and that we have chosen the amendments that we have put to the vote. Thank you.

Taxation (Post-transition Period) Bill

Pat McFadden Excerpts

3rd reading & 3rd reading: House of Commons
Tuesday 15th December 2020 Commons Chamber

[Sir William Cash]

Provided the treaty itself, and therefore the Act of Parliament that follows from it, maintain the principles I set out in my question to the Secretary of State for Business, Energy and Industrial Strategy yesterday, there is no question as to whether we will be entitled to exercise our sovereignty and to displace European Court jurisdiction and the EU laws, for example—there are many others—on state aid. We will be entitled to do so, but it is a matter of constitutional law and also, as I have explained, international law.

I am afraid that there has been a great deal of assertion that we are so-called potentially in breach of international law, but international law recognises the fact that a country can exercise its sovereign rights to defend its economic interests from a national point of view. In fact, Helmut Schmidt did precisely that in, I think, 1998 over the question of the deutschmark and the dollar. There are many examples, and we have not got time to go into them all today.

I will turn to some of the precedents just to illustrate the fact that it is not such a novel idea somehow or other to use a “notwithstanding” clause or formula, and that applies to all parties, whether that is the Labour party, the coalition, where the Liberal Democrats joined in and voted with us on these matters, or the Conservative party. For example, the Income and Corporation Taxes Act 1988 provides that the parts that diverge from treaty obligations—the language of the section was completely unambiguous—were “notwithstanding anything contrary” to those arrangements set out in the Act. The section was enacted to retaliate against the introduction of unitary tax systems adopted by certain states in the US, most notably in California. I think my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) may know about that.

What I am saying is that such provisions are not exactly unusual. Indeed, in the Finance Act 2013, which was under the coalition, the Liberal Democrats went along with allowing Parliament to effectively write a blank cheque to interfere with international treaties—approximately 130 of them, in fact. That provision is still in force. No one questioned the Chancellor’s right to introduce any such legislation or, indeed, the lawfulness of the work of Her Majesty’s Revenue and Customs, which still relies on it in combating questions relating to such arrangements.

Then there are other precedents. I shall stick to Finance Acts at this juncture as that is what we are dealing with in the context of this particular Bill, which is, of course, a finance Bill. Section 52 of the Finance (No. 2) Act 1945 overrode aspects of the Ireland-UK tax treaty of 1926. I hope I may be allowed a slight smile here, as I look across the Irish sea and consider the position with regard to the Irish Government in relation to the “notwithstanding” clauses, because we actually did this in 1926. The Act was used as an example in a case involving Collco in which the court said that if the statute is unambiguous, its provisions must be followed even if they are contrary to international law. It could not be clearer. The Finance Act 1955 again overrode the Ireland-UK tax treaty. In the Inland Revenue Commissioners v. Collco Dealings, Viscount Simonds said, “The company has no rights under any agreement. Its rights arise from the Act of Parliament, which confirmed the agreement and give it the force of law.”

Section 59 of the Finance Act 2008 excluded UK residents from benefiting from provisions in respect of profits from the trade etc. Then there is the coalition arrangement under the Taxation (International and Other Provisions) Act 2010 where, again, the position was made entirely clear in accordance with the precedents.

Indeed, it is not just the UK, or even a party in the UK, that has been doing this over a period of time in its economic and national interests. An example from 2020 is the European Central Bank’s bond-buying scheme. In May 2020, the German constitutional court sought to override EU law and the Court of Justice, suggesting that the ECB’s public sector purchase programme was unconstitutional. Then there are the bail-outs. Every one of the bail-outs from 2010 to 2015 could justifiably be described as in breach of article 125 of the Treaty on the Functioning of the European Union. I will not read out the details, but I shall give some examples: the first Greek bail-out in 2010; the Irish bail-out in 2010; the Portuguese bail-out, the second Greek bail-out; the Spanish bail-out; the Cypriot bail-out; and the third Greek bail-out in 2015. There are so many examples—whether in the UK, or in relation to other member states, or, indeed, in relation to the EU itself—that have demonstrated that, when it comes to the question of sovereignty and the ability to override treaties, this is done quite often as a matter of course. I am not saying that it is done generally. I am not saying that it happens every week or every day. What I am saying, however, is that it happens and that it happens for good reasons which are directly related to the arguments on sovereignty which I gave at the beginning, and it is not for the unelected House of Lords to tell us. That is why, in this Bill, they would not have been able to do so because of the issue of financial privilege.

I am bringing forward these amendments. I shall decide as we proceed whether I will press them to a vote. I will leave it at that for the moment, because I am more than fascinated to hear the usual Europhile utterings of the right hon. Member for Wolverhampton South East (Mr McFadden) who is about to speak.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure, as always, to follow the hon. Member for Stone (Sir William Cash). I rise to speak to new clause 3 in the name of the Leader of the Opposition, and, with it, amendments 1 and 2, which are also in his name and the names of my right hon. and hon. Friends. These amendments are pro-business and pro-compliance. They are motivated by trying to get as much information to the businesses affected by the changes in this Bill in as short a timescale as possible.

The Bill that we are discussing sets out a number of taxation changes, many of them as a result of the Northern Ireland protocol. These measures will have an impact on businesses throughout the United Kingdom, but in particular, businesses in Northern Ireland and those who trade with them. In a recent evidence session for the Northern Ireland Affairs Committee, HMRC was asked how many new declarations there would be under the kind of system set out in the Bill. The official giving evidence said, to be fair, that it was a new system, so they could not be sure, but that there could be about 11 million new declarations a year. That is a sizeable additional amount of information that businesses have to publish.

The amendments we are putting forward this afternoon try to help those businesses to cope with the changes set out in the Bill. I should stress that nothing in these amendments alters the terms of the changes set out in the clauses or the purpose of the Bill. The Government have signed up to the protocol and we want to see them abide by the agreement they have made. There may be those in the Conservative party—in fact, there almost certainly are—who do not like the obligations that the protocol entails, but we believe that the Government should stick by the commitments they have made. The changes in the Bill are largely, though not entirely, a consequence of that agreement.

However, many of the clauses in the Bill are enabling in their nature. They confer on the Treasury powers that are to be filled in at a later date. For example, clause 1 says that the Treasury may by regulations provide a definition of goods being imported into Northern Ireland that

“are at risk of subsequently being moved into the European Union.”

It goes on to talk about which duties shall apply in the case of these so-called at-risk goods. Very similar language is used in clauses 2 and 5 and a number of the schedules—that the “Treasury may by regulations” provide.

To be fair to the Minister and to the authors of the Bill, there is nothing unusual about a Bill taking enabling powers that are then to be set out in further detail in regulations that come after the Bill has passed its parliamentary proceedings, but what is unusual is the context and the timescale involved. The end of the transition period is in just 16 days and, in the middle of those 16 days comes the Christmas holidays, so the Government are asking businesses to absorb, prepare for and comply with a new series of taxation regulations that those businesses have not yet seen, and to do so over a two-week period coinciding with the biggest holiday of the year. And they are doing that at the end of a year in which the very same businesses have already faced unprecedented turbulence in the wake of a global pandemic.

The businesses concerned do not want to fall foul of regulations. They want to comply. They want to be able to get this right. Businesses in Northern Ireland and the trade bodies that represent them have put in enormous efforts over the past few years to try to prepare for this moment. Of course, they could have spent all that time and effort doing what they were set up to do, which is to provide goods and services to their customers, but the process of Brexit and the specific circumstances of Northern Ireland, which are now enshrined in the Brexit withdrawal deal, have meant that a great deal of effort has had to go into trying to understand the trading and taxation rules that will kick in after the end of this year. So here we are with this Bill, with just over two weeks to go. With the best will in the world, how do the Government expect them to do this on this kind of timescale?

The purpose behind the amendments is very simple: it is, even at this late stage, to encourage the Government to get a move on. When I moved a similar amendment in Committee last week, the Minister said that guidance had been published in October, but that is not what we are talking about here. We are talking about the details of the regulations enabled by this Bill, which was published only last week.

The Minister cannot seriously be telling the House that everything covered by the Bill was dealt with in October, and there is nothing more to add. If that was the case, it would prompt the question as to why it was published only last week. The answer, of course, is that the Government wanted to use it to hold the threat of the kind of provisions that the hon. Member for Stone has just been talking about over the trade negotiations—a damaging and self-defeating tactic.

--- Later in debate ---

[Mr McFadden]

I do not propose to detain the House for very long. I thank the Minister for the typically courteous way in which he has led these short debates on the Bill. He has outlined the changes that the Bill makes through its various clauses on customs, VAT, insurance liability and so on, and I do not propose to repeat all that.

From our point of view, and as I have made clear all along, we do not oppose the passage of this Bill, because we understand that these changes have to be put in place. The Government reached agreement on the Northern Ireland protocol. We want them to stick to and abide by their agreements as we want the EU to stick to and abide by its agreements, too. Many of the changes in the Bill stem from those agreements. I also reiterate my party’s strong support for the Good Friday agreement and for policies and practices that uphold the spirit and letter of the agreement into the future.

We have set out our views on the timing of the Bill and the difficulties that the changes it outlines pose for businesses trying to comply with them. The Minister has said it is always last minute with the EU and that it was always going to be like this. I am not sure I fully agree with that. We are asking a lot of businesses with just a couple of weeks of the year left, in the midst of the pandemic and as we are about to enter the Christmas holiday period. I hope that the Minister and the Exchequer Secretary to the Treasury, the hon. Member for Saffron Walden (Kemi Badenoch), who joined him last week, are correct when they say that everything will be in place by 1 January, but I cannot help but reflect at this time of year that perhaps in the minds of many it did not always need to be like this. Perhaps the Prime Minister’s Christmas wish—all he wanted for—was that the German car manufacturers would come riding over the hill and influence the negotiations. I hope that Santa visits all good boys and girls over the Christmas period, but I do not think that that particular Christmas wish of the Prime Minister and many of his colleagues is going to come true. This week, just as last week, one gets the impression that the action is elsewhere. I do not know whether an agreement will be reached in the next couple of days. There has been some rumour and social media chatter that we are heading in that direction over the past hour or so. Time will tell and wisdom would counsel us to wait to see what happens before making any predictions.

These measures in the Bill are largely a result of the commitments that the Government have made. I hope they are not too burdensome on businesses because at the end of all this—both the Brexit process and the covid period, which we hope to see come to an end through the use of the vaccine—we will have to gather around a process of business getting back to what it does: trading, serving its customers, providing goods and services and helping economic growth to come back to the country. There may be competing visions as to how best that should happen in the future, and what a blessed debate that would be in our politics, rather than some of the issues that have coloured it over recent years. I thank you, Mr Deputy Speaker, and all the Members who have contributed to debates on this Bill.

Draft Customs Safety and Security Procedures (EU Exit) Regulations 2020

Pat McFadden Excerpts

Thursday 10th December 2020 General Committees

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Nokes.

The Minister, for whom I have great respect, as he knows, describes these regulations as technical, but I must differ from him. I think they are more than technical. They are very significant and a graphic example and symbol of the mess the Government have got themselves into as we approach the end of the transition period. I say that because through these regulations the Government are acknowledging that they cannot guarantee that the current safety and security requirements on exports can continue to be met without causing disruption to border security. They have put themselves in the invidious position of having to introduce regulations that compromise our security to guarantee the free flow of goods at the border.

The regulations respond to that dilemma by granting HMRC the power to waive the need for these pre-departure declarations, or to modify the time limit for their submission. In tabling these regulations, the Government are openly acknowledging that they are taking powers that, if used, would water down the safety and security requirements we have in place for exports through our ports. The explanatory memorandum that accompanies the regulations —these things are normally pretty dry explanations of the technicalities involved—is clear about the possibilities. Paragraph 7.4 states:

“There may be risks associated with using these powers…for example, to border security.”

There you have it. The regulations are not technical. That is not an allegation from me. It is not an allegation that the Opposition have made. It is a quote from the Government’s own explanation of what they are doing.

What exactly are these risks that the Government have identified? What exactly are the risks that the regulations could enhance? Why have the Government found themselves proposing a policy with such potential consequences? What a trade-off to put the country in to, really. To avoid disruption to trade, we have to take measures that potentially put our border security at risk. I repeat that that is not an allegation from me; it is the Government’s own explanation, before the Committee right now, of what they are doing with these regulations.

At the moment, as the Minister said, pre-departure declarations enable the UK to meet international standards for safety and security relating to the movement of goods, following the World Customs Organisation’s SAFE framework. The organisation began in 1952 as the Customs Cooperation Council and the UK was a founding member, yet today’s regulations would hinder our country’s ability to support the SAFE framework. We are literally opting out, on a temporary basis, of something called SAFE. That is what the Government are doing.

What does it say about the Government’s management of this process that in order to help business avoid the impact of disruption to exports at the border, they are taking powers to risk our border security in this way? Why should the price of free-flowing trade be the introduction of a smugglers’ charter that increases risks to us all? The regulations say that this will only be the case for up to six months, ending on 1 July next year, but can the Minister guarantee that? Can he guarantee that he will not be back here or that the Government will not extend the waiver beyond the first six months of next year in some other way? What if there is ongoing friction at ports? Will Ministers continue to waive the requirements for these declarations in the future?

What discussions has the Minister or the Treasury had with the Home Office about this in order to minimise the impact on border security? He mentioned weapons, I believe. Will he clarify what he meant when he mentioned weapons and how the regulations will affect them?

The volume of pre-departure declarations is likely to be greater after the end of the transition period because they will need to be made for goods exported to the EU as well as the rest of the world. What extra capacity is being put in place at HMRC from 1 January to process this uplift in pre-departure declarations, thereby helping to reduce the likelihood of the security and safety requirements creating border disruption?

It is often said in this House that keeping our country safe and secure is the first duty of any Government. It is often said because it is true. It is an indictment of the party that used to call itself the party of law and order that in government it has laid regulations that Ministers openly admit will compromise our border security. What an indictment of the handling of this situation. The powers, if exercised, would have that effect. That is the admission that the Government made today. I therefore have to disagree with the Minister’s view that the regulations are just technical measures. They are a graphic example of the mess that the Government have found themselves in.

--- Later in debate ---

[Jesse Norman]

I thank the Opposition spokesmen for their comments. The right hon. Member for Wolverhampton South East says this is not technical. Of course, by “technical” I do not mean that the law may not have some impact. Of course, this is a power that we do not anticipate necessarily having to use; it is a tool that the Government think is advisable to be used in some very constrained and particular circumstances in the event of unanticipated disruption. We are going through a major change in our trading arrangements. It is sensible to make contingency arrangements.

The right hon. Gentleman may have forgotten that when it comes to safety and security declarations, data is not gathered by the UK in regard to trade with the EU, because we have been part of the EU internal customs and internal market. From that point of view, nothing changes. He and others have asked whether there will be some great compromise to security. We do not anticipate a great compromise to security.

[Mr McFadden]

The Minister has just said that nothing changes in terms of relations with the EU because we are part of the single market. From 1 January, we will not be part of the single market so quite a lot changes.

[Jesse Norman]

No, what I have said is that, since we do not gather data at the moment, what we are doing is continuing a system that already exists for a period of time—or we would be if we put in place these powers—and that does not represent a change from what we do at the moment as we do not gather the data at present. As I have already said, our trading arrangements of course do significantly change.

The right hon. Gentleman asked about the Home Office, and I can reassure him that of course these measures are developed in consultation and consideration and discussion with the Home Office. The SNP spokesman, the hon. Member for Paisley and Renfrewshire North, seemed to be having a few operational issues with his own handwriting—I am not quite sure if that is true—so he is well placed to speak on operational issues. Let me just say one thing: as far as I can tell, the numbers that he quoted were from external organisations, the NAO and so on. It is for them to comment on whether the numbers they come up with should be updated. From the Government’s standpoint, the numbers are as they have been published. With that in mind, I invite the Committee to support the motion.

[Mr McFadden]

The Minister has not answered a couple of questions that I asked. One was whether he can guarantee that there will not be an extension of these provisions beyond the first six months of next year, and the other was the question of weapons that he mentioned in his opening remarks. Can he explain exactly how these regulations will affect the export of weapons?

[Jesse Norman]

Sure. What I was saying, as the right hon. Gentleman will recall, as regards duration is that they last for six months. Of course, to seek a guarantee in such circumstances is a classic political request. No guarantees can be given, but we certainly do not anticipate extending the regulations. They are specifically designed to be a contingency tool to be used in specific circumstances, for specific purposes, and for a time-limited period.

In relation to weapons, all I said was that the existing arrangements had in part the goal of monitoring the transfer of weapons. As I have said, data gathering does not at present exist on the safety and security declarations, and that will not change as a matter of fact for a period of time, but of course Border Force and other agencies that are concerned with the flow of goods across the border continue to be engaged, and from that perspective we think that the border remains well defended and well supported. Of course, we have made significant infrastructure investments in order to make sure that that is the case.

Question put and agreed to.

11.50 am

Committee rose.

Taxation (Post-transition Period) Bill

Pat McFadden Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 9th December 2020 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I thank everybody who has contributed to this short debate. To pick out a few, the hon. Member for Stone (Sir William Cash) told us that he was reserving his judgment on some of these measures, particularly the Government’s decision not to proceed with the “notwithstanding” clauses. The hon. Member for Glasgow Central (Alison Thewliss) talked about hidden customs charges and described parts of the Government’s approach as “absolute mince”. The right hon. Member for Wokingham (John Redwood) spoke about the dual taxation regime, which we will return to in the Committee stage shortly to follow. My hon. Friend the Member for Chesterfield (Mr Perkins) spoke about the phenomenon of people saying that it is never a proper Brexit, no matter what kind of Brexit it is. The hon. Member for North Down (Stephen Farry) gave us a very welcome Northern Ireland voice on these issues.

What this Bill does, first and foremost, is to put in place a framework for the monitoring, taxation and movement of goods that was not there in the past. However much the Government try to duck that issue—to pretend that everything is going to carry on as normal—the new regime is there for everybody to see in the clauses of the Bill and the regulations to follow. Business to and from Northern Ireland will be conducted on a more monitored, differently taxed and significantly more bureaucratic basis than before. There is simply no escaping that and no hiding from it, and it would be better if the Government acknowledged this as what they have agreed. My first question to the Minister is: do the Government really expect to implement everything in this Bill and to secure compliance from businesses both in Northern Ireland and in the rest of the UK on all these measures by 1 January? Is that the Government’s realistic goal?

The Bill, of course, could have been very different. It could have contained clauses setting aside parts of the Northern Ireland protocol. The Government did look ready to double down on the course of action that they had embarked on in the UK Internal Market Bill, but thanks to yesterday’s statement by the Chancellor of the Duchy of Lancaster and his counterpart, Mr Šefčovič, the Government have announced that they will not proceed with such clauses. We can now look forward to the Government moving amendments in the other place to delete that which they insisted was necessary in this House on Monday evening. It is one thing to play ping-pong with the House of Lords, but quite another to play ping-pong with yourself. Once again, the Government’s MPs who valiantly defended the line on Monday now have a very different line to advance before Thursday. This is not the first time this has happened, and I should guess it will not be the last. If I was a Government Back Bencher, I would be becoming a little bit more wary of following the line from No. 10 on a number of issues.

In all the twists and turns that got us here, Ministers might think that they have acted tough, but threatening to legislate to set aside parts of an international agreement that the Government signed only a year ago has only done damage to the country’s reputation. The Government have not communicated toughness; all they have communicated is that they cannot be trusted. As we embark on a process of trying to negotiate new free trade deals around the world, what a signal to send and what a starting point: do a deal with the Government who threatened to ditch parts of the last one that we signed. That was not clever negotiating tactics and it was not toughness—it was reckless, and, I am afraid, it was revealing about the character of the Government.

The Bill sets out the new customs regime for so-called at-risk goods moving to and from Northern Ireland and the rest of the UK. Although it empowers Ministers to levy the necessary duties, there is still much that, as clause 1 says, will have to be clarified in new regulations from the Treasury. We only have 22 days to go. When will we see these new regulations? When will businesses in Northern Ireland, or those anywhere else in the country that send goods to Northern Ireland, know exactly what the new regime will be? Does the Minister really think that this is a proper way to do this, more than four years after the referendum and just three weeks before the end of the transition period?

Similar phrasing is used in clause 2 in relation to goods moving from Northern Ireland to the rest of the UK, and the same point applies: when will businesses know what is happening? On the VAT regime in clause 3, will the Minister set out how the EU’s VAT regime, as it applies to Northern Ireland, will interplay with the UK’s VAT regime—the question raised by the right hon. Member for Wokingham (John Redwood)? Similarly, on excise duties, how will the measures in clause 4, which apply to everything from spirits and beer to tobacco products, differ from current arrangements? Are the insurance premium tax changes thought necessary in the event of no mutual assistance provisions between the UK and the EU? If they are, are such provisions likely to be part of any deal which, if agreed, would then mean that the clause was not needed?

These measures are likely to pass the House quite quickly tonight, but the real action at the moment is of course not here, but elsewhere. As we debate this Bill, we still do not know whether there will be a free trade agreement reached. After four years, the public, companies and their staff do not know what they will be facing in January, and the root of that decision remains what it has always been: this choice between sovereignty and market access.

The story of the past four years has been the Government moving more and more towards the sovereignty side of that choice. They may say that is the remorseless logic of Brexit, but no one should doubt the significance, because what it means is that, for the first time in history, we have a Government and a process where questions of investment, of people’s prosperity and of their living standards have been progressively relegated to a more and more distant second place. We will see the results of that choice over the coming months. Perhaps after tonight’s dinner in Brussels, we might even be a bit clearer about the results in the days to come, but in the end what has been described as a negotiation is, in fact, a choice. The Government have made their choice, and we will see the effect in the months to come.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

It is a privilege to close this debate on behalf of the Government, and I thank Members from all parts of the House for their thoughtful and varied contributions.

At the end of this month, the transition period will end. As my right hon. Friend the Financial Secretary pointed out at the beginning of today’s debate, we have a great responsibility to be ready for this event. The measures contained in the Taxation (Post-transition Period) Bill will play an important part in the preparations.

Let me take this opportunity to thank Opposition Members for their constructive and collegiate approach throughout the passage of this Bill, despite their evident reservations, and in that same spirit I will address some of the points raised in today’s debate.

The Bill is an essential part of our preparations for the end of the transition period. It takes forward important changes to our tax system to support the smooth continuation of business across the UK. It contains six measures. Three relate to the implementation of the Northern Ireland protocol and three implement wider changes to the tax system, which are needed before 1 January. Most importantly, it will ensure that we meet our commitments to Northern Ireland, including on unfettered access and those commitments as set out in the Northern Ireland protocol. Taken together, the measures form an important part of our preparations as we resume our place as a fully sovereign trading nation.

Now that we have further clarity on the outcome of the Joint Committee negotiations, it is vital that the provisions are in place before the end of the transition period to provide that certainty. The Bill’s passage is necessarily rapid, but it will allow for these important changes to be implemented on time. The right hon. Member for Wolverhampton South East (Mr McFadden) asked if we believed it can be done, and my answer is yes, of course. The UK Government will take forward a pragmatic approach that draws upon available flexibilities to implement the protocol without causing undue disruption to lives and livelihoods.

The Government are committed to supporting business. At the centre of the package is the free-to-use trader support service, which will support business when moving goods into Northern Ireland, educating traders on what the protocol means for them and completing customs safety and security declarations on their behalf. That is working. Since the launch of the registration portal in September, more than 18,000 businesses have signed up for support from the trader support service.

Turning to Members’ comments, the hon. Member for North Down (Stephen Farry) requested confirmation that the UK meets its obligations. The powers in the Bill allow us to implement the Northern Ireland protocol in a way that is consistent with our obligations, and I appreciate his broader supportive statements. My hon. Friends the Members for South Ribble (Katherine Fletcher) and for Harrogate and Knaresborough (Andrew Jones), among others, rightly referred to our closing of the VAT loophole in clause 7 and schedule 3. Low-value consignment relief is subject to widespread abuse and contributes to trade distortion. It disadvantages UK high street businesses that are required to charge VAT where overseas businesses are not, either for legitimate reasons or through abuse, and removing the relief will bring overseas sellers on to an equal footing with UK businesses.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked why the clause applied just to low-value goods and whether there was an opportunity for it to apply to high-value goods as well. The reason is that the £135 threshold aligns with the threshold for customs duty liability. Imports of goods greater than £135 in value are subject to enhanced customs requirements, which would negate the benefit of moving VAT away from the border. Therefore, imports of goods greater than that amount will remain subject to the current model for goods arriving from non-EU countries, where VAT is collected at the point of importation.

My hon. Friend also asked what revenue we expected from this change. The Office for Budget Responsibility has forecast that these changes will raise over £300 million a year over the next five years, and £1.6 billion over the scorecard period. Approximately two thirds of that will come from improving collection and tackling non-compliance through the new VAT treatment of cross-border goods, and the final third of the revenue will come from the removal of low-value consignment relief, which will end widespread abuse of this relief.

My right hon. Friend the Member for Wokingham (John Redwood) asked whether the ECJ would be the ultimate arbiter for VAT and excise. The ECJ will continue to have a role where EU directives apply in Northern Ireland—for example, where there are disputes on how the EU rules should be interpreted. However, the rules will continue to be policed by HMRC, which will continue to be the tax authority for the whole of the UK. He also mentioned Northern Ireland being subject to two regulatory systems. Northern Ireland is and will remain part of the UK and its VAT system. It is correct that the Northern Ireland protocol means that NI will continue to align with the EU VAT rules in respect of goods, but not services. That is to ensure that trade is not disrupted on the island of Ireland, and to allow us to meet our commitments under the Belfast/Good Friday agreement. But, as I said, HMRC will continue to be the tax authority for the whole of the UK. Businesses will continue to have a single UK VAT number, issued by HMRC, and they will submit only one UK VAT return to account for VAT on all supplies of goods and services.

My hon. Friend the Member for Stone (Sir William Cash) asked about the current negotiations. Just to remind him and reiterate to the House, the UK Government set out on 17 September that Parliament would be asked to support the use of provisions such as clause 45 of the United Kingdom Internal Market Bill and any similar subsequent provisions in a Finance Bill. These clauses were introduced as reasonable steps to create a safety net, so that the Government would always be able to deliver on their commitments to the people of Northern Ireland in the event that a negotiated outcome could not be reached in the Joint Committee. However, as we all now know, following intensive and constructive work over the past weeks by the UK and EU, we now have an agreement in principle on all issues in relation to the protocol on Ireland and Northern Ireland. As we have mutually agreed solutions, the UK can now withdraw clauses 44, 45 and 47 of the UKIM Bill and not introduce any similar provisions in this taxation Bill.

[Mr McFadden]

On that point about the “notwithstanding” clauses, can the Minister guarantee, given that neither the United Kingdom Internal Market Bill nor this Bill has finished its passage in the House, that the Government will not reintroduce them at any further stage?

[Kemi Badenoch]

As I have just said, I am not in a position to be talking about what is happening in the future. We have been negotiating in good faith and we have an agreement in principle. I do not believe that those clauses will be coming back, but as the right hon. Gentleman knows very well, the negotiations are still ongoing and we need to wait and see what the outcomes of those negotiations are. It would be quite wrong for me or him to pre-empt anything else that will be taking place, and we must not bind the hands of our negotiators. It is absolutely right that we all speak with one voice in this House.

The hon. Member for Glasgow Central (Alison Thewliss) mentioned GB and NI parcels and asked how consumers would know whether there was a customs charge. The movement of parcels into Northern Ireland is another important part of how the protocol will work in practice for people in Northern Ireland. That is why the UK Government will take forward a pragmatic approach, just as we have elsewhere, that draws on available flexibilities to implement the protocol without causing undue disruption. In terms of schedule 3, she gave the example of the earrings from Slovenia that she had ordered. It is worth stressing that schedule 3 deals with imports to the UK and not exports. It will ensure that UK customers see the amount of VAT that needs to be paid at the point of sale on goods below £135. For goods between Northern Ireland and GB, VAT is already charged on supplies sold by a GB business to an NI customer. When the Northern Ireland protocol comes into effect, Northern Ireland businesses or consumers purchasing goods from VAT-registered businesses will see no significant difference in costs from a VAT perspective.

 

Let me conclude by saying that tonight, this House has the opportunity to give businesses in Northern Ireland and throughout the rest of the UK certainty about the arrangements that will apply from 1 January next year, to strengthen the precious bonds of union that tie this country together, and to prepare this country for an even brighter future as an independent sovereign trading nation. For all those reasons, I urge all Members to support the Bill.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

Taxation (Post-transition Period) Bill: Business of the House

Pat McFadden Excerpts

Wednesday 9th December 2020 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I want to make a few comments about this business of the House motion, because I think it is indicative of where we have got to.

After four years, we have a Bill on the taxation arrangements after Brexit that is to be debated in less than four hours. Not only that, but it is a Bill of over 100 pages in length that was published less than 24 hours ago. The Minister may claim that the House has passed emergency legislation in a single day in the past, and of course that is true: the House can do that in emergency circumstances. But this deadline that we face at the end of the year is not new. It is not a surprise. It has been known ever since the withdrawal agreement was reached. The Government have said repeatedly over the past year that this was an immovable deadline. So why is it, just three weeks before that deadline, that the Government are only publishing these arrangements and this timetable now?

Businesses in Northern Ireland, and those that do a lot of trade with Northern Ireland, could have been given some idea of what was coming long before now, but as it stands, not even the Bill before us gives them certainty, as so much of it has to be followed up with further regulations. The truth is that there was no need for this last-minute legislative scramble. The real reason we are in this position—the reason why this business motion is before us and gives the House so little time—is that the Government thought that it was a good negotiating tactic to breach the agreement, or to threaten to breach the agreement, that they reached with the EU last year. They threatened to do that in this Bill as well as in the United Kingdom Internal Market Bill. As so often, it was a threat posing as strength that ended up doing more harm to us than to anyone else. That is why this Bill was so late, and that is why the time to debate it is so short.

The Government, immediately before they embark on a new future based on trade deals, chose to advertise around the world that they were willing to break the last one that they signed. Boasting about your willingness to go back on your word is not an illustration of strength; rather, it is a graphic portrayal of what Brexit has done to the Conservative party.

[Sir William Cash (Stone) (Con)]

Will the right hon. Gentleman give way?

[Mr McFadden]

I am going to continue, because I do not have long to go.

As the House has been reminded, it was Mrs Thatcher who said:

“Britain does not break treaties. It would be bad for Britain, bad for our relations with the rest of the world and bad for any future treaty on trade”.

The threat to do so has left us with the timetable for this Bill. That inevitably means that scrutiny of today’s measures will be severely truncated and parts of it will go through without being properly examined. What we have before us is the appearance of scrutiny, not the reality—Potemkin scrutiny. That is what a timetable like this gives us.

This is not just about us here in this House—it also leaves businesses affected, with little or no time to absorb and understand what is being planned. There have been many comments on the state of things in recent days, but perhaps the most pithy has come from the chief executive of the Road Haulage Association, who said this week, commenting on the border arrangements:

“Frankly, it’s just a mess.”

The bigger point here is that the reason why we are in this position is that the Government’s approach to all of this has relegated concerns about business, prosperity and people’s livelihoods to a distant second place. This motion and the approach behind it are not only bad for the legislative process, but bad for the country too.

Taxation (Post-transition Period) Bill

Pat McFadden Excerpts

Committee stage & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Wednesday 9th December 2020 Commons Chamber

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

Before I ask the Clerk to read the title of the Bill, I should explain that in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s chair during Committee, I will remain in the Speaker’s Chair in order to comply with social distancing requirements, although I will be carrying out the role not of Deputy Speaker but of Chairman of the Committee. Chairs of the Committee should be addressed as such, rather than as Deputy Speakers.

I must also modify the call list slightly in the light of the selection and grouping of amendments by the Chairman of Ways and Means. I will call the right hon. Member for Wolverhampton South East (Mr McFadden) to open the debate by moving amendment 2; we will then follow the rest of the call list as published, starting with the hon. Member for Stone (Sir William Cash). I will call the Minister at the end to respond to the debate.

Clause 1

Duty on goods removed to Northern Ireland

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I beg to move amendment 2, page 2, line 43, at end insert—

“(4A) The Treasury must publish guidance setting out its proposed approach to the reliefs, repayments and remissions referred to in subsection (3)(b) within four working days of this section coming into force.”

[The First Deputy Chairman]

With this it will be convenient to discuss the following:

Clause stand part.

Amendment 3, in clause 2, page 4, line 24, at end insert—

“(5) The Treasury must publish guidance setting out its proposed approach to the reliefs, repayments and remissions referred to in subsection (4)(a) within four working days of this section coming into force.”

Clause 2 stand part.

Clauses 3 to 4 stand part.

Amendment 1, in clause 5, page 7, line 44, leave out subsection (3).

This amendment is connected with NC1, which would make all substantive regulations under the Bill subject to the affirmative procedure.

Clause 5 stand part.

Clauses 6 to 12 stand part.

New clause 1—Regulations—

“Notwithstanding any other enactment, a statutory instrument containing regulations made under this Act, other than regulations made under section 11, may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.”

This new clause would make regulations made under the Bill (other than the commencement regulations in clause 11) subject to House of Commons affirmative procedure.

New clause 2—Treasury use of powers—

“(1) The Treasury must, within four working days of the day on which this Act is passed, publish a report setting out the timeframe within which it will use the powers to make regulations conferred by—

(a) section 40A(2) of TCTA 2018;

(b) section 40B(1) and (2) of TCTA 2018;

(c) section 30A(4) of TCTA 2018;

(d) section 30B(1) and (3) of TCTA 2018;

(e) section 30C(5) of TCTA 2018, and

(f) section 5(2) of this Act.

(2) The Treasury must publish an annual report setting out how it has made use of the powers referred to in subsection (1).

(3) Each report under subsection (2) must include an assessment of—

(a) what considerations the Treasury made when deciding to use its powers, and

(b) the impact of the regulations on individuals and businesses throughout the UK, and specifically in Northern Ireland.”

That schedule 1 be the First schedule to the Bill.

That schedule 2 be the Second schedule to the Bill.

That schedule 3 be the Third schedule to the Bill.

That schedule 4 be the Fourth schedule to the Bill.

[Mr McFadden]

As well as speaking to amendment 2, I will speak to amendment 3, which makes the same points, and say a word about new clause 2. All three have been tabled in the name of the Leader of the Opposition and those of my right hon. and hon. Friends.

Clause 1 sets out the new customs regime that will apply to goods moving between Great Britain and Northern Ireland—specifically those that are deemed to be at risk of entering the EU single market. The Northern Ireland protocol that the Government have signed up to requires such a regime as a result of their decision to leave the single market and the customs union. It will mean a system of paying customs duties for those who move such goods.

As yet, none of us knows whether a deal will be agreed, although we know that an important dinner is taking place in Brussels tonight. However, we welcome the announcement of a trusted trader scheme today, although it comes very late in the day. That scheme will remove some of the possible tariffs on goods that move from Great Britain to Northern Ireland in the event of a no-deal Brexit, but for other goods we are clear that we do not want to see additional costs for businesses and communities in Northern Ireland.

The House should note that Northern Ireland consumers have, on average, about half the discretionary income of consumers in the rest of the United Kingdom; the long and the short of it is that they simply cannot afford such additional trade tariffs on goods. There therefore needs to be a system for at-risk goods that do not leave Northern Ireland, in line with the agreement that Northern Ireland remains part of the UK’s customs territory and that customs duties should not apply to goods that travel between Great Britain and Northern Ireland if Northern Ireland is their end destination.

The protocol and the arrangements agreed yesterday by the Chancellor of the Duchy of Lancaster and his counterpart create new requirements for businesses to be set out in regulations. Clause 1 is specific about that, for example in new section 40B of the Taxation (Cross-border Trade) Act 2018, which states that the Treasury

“may by regulations provide”

for which goods the new duties will apply to, and make

“provision about reliefs, repayment and remission…checks, controls or administrative processes”

and other matters.

My broad point is that that is obviously a description of new arrangements that are not in place right now; that is why they are being introduced in the Bill. As I said on Second Reading, it would be better for the Government to acknowledge that this is a new regime with new requirements, instead of the pretence that everything will carry on exactly as it is.

As I also said on Second Reading, we only have three weeks to go. Businesses in Northern Ireland and those that do a lot of trade with Northern Ireland will be asking, “What does this mean for me? What processes do I have to go through? What do I have to pay? If the goods remain in Northern Ireland, will I be entitled to a rebate if I have paid? How will I claim that rebate? How will this system work?” Those are all legitimate questions about the new regime being introduced by the Bill and the regulations enabled by it. Amendment 2 asks the Treasury to reach conclusions and to publish answers on these matters in the coming days. Frankly, it is already too late to expect businesses to absorb more than 100 pages of legislation within a few weeks. But even if it is too late, we cannot afford more delay, which is why our amendment calls for the publication of guidance on this within a few days of the Bill coming into force.

I should stress that nothing in this amendment alters the regime that the Government are trying to bring in. Everything in the amendment is fully in line with the Northern Ireland protocol and with the commitments that the Government have made as part of that. We want to provide clarity for businesses as soon as possible, rather than leaving open-ended the time for these regulations to be published.

In response to my question at the end of the Second Reading debate, the Exchequer Secretary to the Treasury said with confidence that she was sure this could all be done by 1 January. I hope she is right and that any scepticism that all these arrangements will be completed in the three weeks between now and 1 January is unfounded. Let us hope that she is right. The amendment asks for the Government to outline precisely how these duties and tariffs, if they are necessary, will be rebated. Businesses will be asking that question and, quite reasonably, they will want an answer.

Will businesses be required to pay up front and then be reimbursed by HMRC, as envisaged in the Northern Ireland protocol? Is that what the Government have in mind? If so, the Minister should know that there are fears that such a rebate system could be hugely complex. Indeed, some fear that it is not fully built, but we are told that it will all be ready for 1 January. These are vital questions. As it stands, the Bill does not fully answer them, nor does it set out a timeframe in which they will be answered, which is why we have tabled amendments 2 and 3 to the Bill.

Finally, new clause 2 is an attempt to give both Parliament and the public some timetable—some road map—for the blizzard of regulations that are enabled by the Bill and to secure a report on their impact in the future. As I said, this is a new regime. The Bill legislates for something that we have not had to do before in the United Kingdom, and we should at least have the courtesy of reporting on how it is operating in the future. New clause 2 asks for both a timetable of the regulations and a report on how the new regime has operated. These are completely reasonable amendments. I hope that, in a spirit of generosity, the Government will find it within themselves to accept them, and I look forward to hearing the Financial Secretary to the Treasury wind up the debate.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

Sir William Cash is not here, so we go to Alison Thewliss.

--- Later in debate ---

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

I believe the right hon. Member for Wolverhampton South East may wish to withdraw his amendment.

[Mr McFadden]

I point out to the Minister that he said guidance was published in October; he cannot be referring to the guidance referred to in clauses 1 and 2, which talks about the regulations under the Bill. However, on the basis of the whole debate, we will not press the amendment to a vote tonight, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

Amendment proposed: 1, in clause 5, page 7, line 44, leave out subsection (3).—(Alison Thewliss.)

This amendment is connected with NC1, which would make all substantive regulations under the Bill subject to the affirmative procedure.

Question put, That the amendment be made.